For CFP® Professionals

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Terminology

This terminology applies only for purposes of interpreting and/or enforcing CFP Board’s Code of Ethics, Rules of Conduct, Practice Standards and Disciplinary Rules.

► “CFP Board” denotes Certified Financial Planner Board of Standards, Inc.

“Candidate for CFP® certification” denotes a person who has applied to CFP Board to take the CFP® Certification Examination, but who has not yet met all of CFP Board’s certification requirements.

► “Certificant” denotes individuals who are currently certified by CFP Board.

► “Certificant’s Employer” denotes any person or entity that employs a certificant or registrant to provide services to a third party on behalf of the employer, including certificants and registrants who are retained as independent contractors or agents.

► “Client” denotes a person, persons, or entity who engages a certificant and for whom professional services are rendered.  Where the services of the certificant are provided to an entity (corporation, trust, partnership, estate, etc.), the client is the entity acting through its legally authorized representative.

► “Commission” denotes the compensation generated from a transaction involving a product or service and received by an agent or broker, usually calculated as a percentage on the amount of his or her sales or purchase transactions. This includes 12(b)1 fees, trailing commissions, surrender charges and contingent deferred sales charges.

► “Compensation” is any non-trivial economic benefit, whether monetary or non-monetary, that a certificant or related party receives or is entitled to receive for providing professional activities.

A “conflict of interest” exists when a certificant’s financial, business, property and/or personal interests, relationships or circumstances reasonably may impair his/her ability to offer objective advice, recommendations or services.

► “Fee-only.” A certificant may describe his or her practice as “fee-only” if, and only if, all of the certificant’s compensation from all of his or her client work comes exclusively from the clients in the form of fixed, flat, hourly, percentage or performance-based fees.

► “Fiduciary.” One who acts in utmost good faith, in a manner he or she reasonably believes to be in the best interest of the client.

► A “financial planning engagement” exists when a certificant performs any type of mutually agreed upon financial planning service for a client.

► A “financial planning practitioner” is a person who provides financial planning services to clients.

► “Personal financial planning” or “financial planning” denotes the process of determining whether and how an individual can meet life goals through the proper management of financial resources. Financial planning integrates the financial planning process with the financial planning subject areas. In determining whether the certificant is providing financial planning or material elements of financial planning, factors that may be considered include, but are not limited to:

  • The client’s understanding and intent in engaging the certificant.
  • The degree to which multiple financial planning subject areas are involved.
  • The comprehensiveness of data gathering.
  • The breadth and depth of recommendations.

Financial planning may occur even if the material elements are not provided to a client simultaneously, are delivered over a period of time, or are delivered as distinct subject areas. It is not necessary to provide a written financial plan to engage in financial planning.

► “Personal financial planning process” or “financial planning process” denotes the process which typically includes, but is not limited to, some or all of these six steps:

  • Establishing and defining the client-planner relationship,
  • Gathering client data including goals,
  • Analyzing and evaluating the client’s current financial status,
  • Developing and presenting recommendations and/or alternatives,
  • Implementing the recommendations, and
  • Monitoring the recommendations.

► “Personal financial planning subject areas” or “financial planning subject areas” denotes the basic subject fields covered in the financial planning process which typically include, but are not limited to:

  • Financial statement preparation and analysis (including cash flow analysis/planning and budgeting)
  • Insurance planning and risk management
  • Employee benefits planning
  • Investment planning
  • Income tax planning
  • Retirement planning
  • Estate planning

► “Professional Eligible for Reinstatement” (PER) denotes an individual who is not currently certified but has been certified by CFP Board in the past and has an entitlement, direct or indirect, to use the CFP® marks. This includes individuals who have relinquished their certification and who are eligible for reinstatement without being required to pass the current CFP® Certification Examination. The Standards of Professional Conduct apply to PERs when the conduct at issue occurred at a time when the PER was certified; CFP Board has jurisdiction to investigate such conduct.

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